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It takes a special contractor to become a WaterFurnace geothermal dealer. It requires an ongoing commitment to the industry’s best training and education programs. WaterFurnace only invests in dealers who are passionate

about providing the finest in products and service, and are less concerned with simply being the cheapest. Maybe that’s why

WaterFurnace is the most recognized and respected name in residential geothermal. Or maybe it’s because WaterFurnace units use the clean, renewable energy found in your backyard to provide savings up to 70% on heating, cooling and hot water.

Or is it thanks to the industry’s best warranty? Contact the experts at ABC Heating & Cooling for more information, and decide for yourself.

visit us online at waterfurnace.com © 2010 WaterFurnace is a registered trademark of WaterFurnace International, Inc.

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Making More Money in Solar PV Industrye heartbeat of any company is to make more sales. But it is what happens aer the sale that gets solar companies and other companies into challenging predicaments. By Keith Cronin

Solar PV Web Marketing Practices and How to Beat the Big GuysBy Peter Troast

ASHP vs. GSHP: MAKING AN APPLES TO APPLES COMPARISON By Doug Carruthers

Positioning Electrical Distributors for Solar GrowthBy Fred Paris

How SREC Price Assumptions Can Impact Solar PV Project IRRs By Chris Williams

Simple Control Strategies for Heat Pumps with Radiant Heating and Cooling By Greg Leupin

14 Trends Driving Renewable Energy in 2013By Chris Williams

HeatSpring’s 2013 Classes

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Table of Contents

HeatSpring's goal is to help small companies, professionals, and entrepreneurs make money in the renewable energy industry.  In HeatSpring Magazine we write articles that teach tips and best practices for marketing, selling, designing and installing, geothermal heat pump, solar PV and solar thermal projects.  We also deliver training and certification classes online and in-person through our Cammpus community learning platform.

Learn more at www.heatspring.com or www.cammpus.com

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ISSUE #003 / 2013HeatSpring, LLC, All Rights Reserved.

Brian HaydenFounder & Publisher

Duncan MillerFounder & Technical Director

Chris WilliamsMarketing Director

Douglas GrayCreative Director

Fred FarisFred has been teaching NABCEP students since 2008 and developed HeatSpring's first 40-hour online PV course.  As a Solar practitioner, Fred’s PV projects include high school, residential, commercial, and church projects. Systems include: roof-mount, ground-mount and pole-mounted PV systems - with and without equinox adjustment. Fred holds AAS, BS, and MBA degrees, and he is still paying off his student loans.

Contributors

Chris WilliamsChris works with HeatSpring developing products and managing online content. Chris is a NABCEP Certified Solar PV Installer and an IGSHPA Accredited Geothermal Installer. He has installed over 300kW of solar PV systems, tens of residential and commercial solar hot water systems and 50 tons of geothermal equipment. Chris is the Chairman of the Government Relations Committee of New England Geothermal Professional Association and he consults with renewable energy companies on sales, marketing and design.

Keith CroninKeith is an in-demand business consultant, speaker and founder of e Solar Business Blueprint, a life changing training program that assists business owners with the tools, resources and metrics needed to grow and manage their solar businesses. He has helped solar companies achieve their goals through his training, speeches, coaching sessions and products. Keith’s life changing message reaches people all over the US, Canada, Central and South America. Keith lives in Kailua Hawaii.

Peter TroastPeter is the Founder/CEO of Energy Circle. He is a passionate advocate for renewable energy and efficiency and drives innovation for the Energy Circle PRO  web and marketing toolset, built exclusively for renewable and energy efficiency contractors. He contributes to the popular Energy Circle blog for energy professionals nationally, maintains the EnergyCircle presence on twitter, and is a frequent presenter at national conferences on topics of contractor marketing and communication, use of social media and energy monitoring.

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Making More Money in the Solar PV BusinessChapter Ten – Solar Success Principles

By Keith Cronin

Of all the things we want from our businesses, making more money with less risk is perhaps the most common priority. Oen this can be very confusing for many businesses, small and large, as the ability to make more money seems to be directly proportionate to the amount of sales that are made. It's true that until something is sold, nothing really happens, but there is more to making money than just more sales.

Focusing solely on sales is a recipe for disaster. Many people in business throw around numbers to each other very casually, perhaps it’s an alpha male characteristic or just a "aw that surfaces every day. “How many million did you do last

year in business?” Have you ever heard anybody speak like this before? I know I have, especially with other business owners, because we get lulled into this as a measure of success. While selling millions or having hundreds of employees can be a signpost for success, it can also be deceiving.

We will explore this idea more in the chapter on sales because this measure can be misleading. e heartbeat of any company is to make more sales. But it is what happens aer the sale that gets solar companies and other companies into challenging predicaments. We wish it was that easy, as if sales were the only recipe, then everyone would be positioning to hire every salesperson known to mankind.

All the Wrong Measurements

If you're making lots of sales, it does not always mean you're making lots of pro$t. You might need to $ll your pipeline with more and more sales just the pay your vendors, your employees, or your taxes. It's like a dog chasing its tail.

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Can you see why in some ways, that more sales are not always the best route to pro$t? You should be focused on pro$table sales. Revenue numbers can only tell part of the story, as it relates to the health of your business. What you really want is a higher price-to-earnings ratio. ere are many ways to make more money in your company. But would you rather work Monday through Sunday just to sell a relatively smaller, incremental percentage of sales of your products? How about spending more time with the people you love, doing the things that you enjoy, and recharging your mind, body, spirit, and making fewer sales but having more pro$ts?

Not to go esoteric on you, but we all need time for renewal in order to be sustainable (remember, we are in the sustainability business). So when I reference making more money, the currency of health and family are priceless, and I encourage everyone to value those relationships in many ways, like all the riches in the world. is is why most large corporations understand that the salary of their top performers needs to be balanced with a compensation package that includes a generous amount of time off.

Recurring Revenue

One of the strategies that I know you should apply in your business immediately is a form of recurring revenue. Anyone that has a home alarm system with a monthly monitoring service can understand what recurring revenue is for the alarm company. You pay them a monthly fee to monitor the system in your home as well as being there for you 24 hours a day, seven days a week, 365 days a year. ese types of recurring revenue businesses are so popular that we are now seeing local cable and telephone companies offering them as an add-on service and also bundling them with their existing services.

How can recurring revenue be applied to your solar business? It's hard to $nd many solar companies that offer any type of service plan to service the solar equipment for the customer. ey oen ignore the other electrical related items in the home for things that aren't even electrically related to the solar system but require annual or semiannually inspections or servicing. Both commercial and residential customers can use your services.

Maintenance AgreementsWhat kinds of services or maintenance can you think of? A few suggestions are a whole house electrical inspection including the circuit breaker box, smoke detectors, and GFCI receptacles in their kitchens, bathrooms, and outdoors. On a commercial or industrial site you could perform energy audits, lighting retro$ts, replacement of air conditioning systems, lighting control systems using motion detection technology, and geo–thermal systems. e list is constantly changing as new technologies are right around the corner. Your customers are most likely not current with the updates

in your $eld, so you can educate them while offering maintenance for their systems.

e list of electrical items that you could check and add value to your customer is long. If you are coming from another industry, what do you do now that would add value to your customer that they aren’t receiving? Just knowing that they can contact you and count on you when they need it the most instills peace of mind. ey want to safeguard their most expensive investment: their home or business and the people they care about.

If you are coming at the solar industry from another building trade, like HVAC or plumbing, and can offer multiple services under one company that provides maintenance agreements already, then you are probably familiar with the idea of servicing. You are adding value in the customer's eyes as many customers are willing to sign service contracts to maintain their equipment in their homes or businesses. Customers prefer to have that concierge experience: make one phone call and have one company service their needs.

e potential of steady maintenance work combined with sharing with your customers any new technologies or energy saving strategies with them will allow you to reduce the lifetime cost of the acquisition of this customer. We'll talk more about customer acquisition costs again later in another chapter as it hinges on another topic we will talk about that is not mutually exclusive.

We live in a service economy and people want to be served. People are very busy and want to know that what they’ve bought is going to be working for a long time. I believe this is a reason solar leasing has also taken off. Someone else is going to maintain the system or power plant for the life of the contractual relationship. Again, another opportunity for you!

One other way to make more money is to have fewer costs. Look into partnering with other companies that do similar work. While it might seem unusual to take this approach and work with potential competitors, let me explain further in a moment, aer I describe the global climate for diversi$cation of your business.

“There will be a huge opportunity to service and manage the megawatts of solar farms already in service as well as the commercial and residential systems that might have been orphaned by their initial installation company.”

As you look at the marketplace today, and if you follow trends, you will notice that there are many areas around the globe as well as locally that are experiencing boom and bust

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cycles. is can have a signi$cant impact on your business as governments change incentive structures that directly cause you as a business owner to potentially layoff employees overnight or in some extreme situations to leave an area altogether. Just read the newspaper, watch the news, or go to the Internet, the information is available for all to read. e conclusive evidence is that counting on incentives to support your business is precarious. Relying on incentives puts you at the whim of a legislative session where the business models you once had can be forced to change. Positioning yourself to have a backup plan can come in the form of a recurring revenue strategy to bolster your position in your marketplace. ere will be a huge opportunity to service and manage the megawatts of solar farms already in service as well as the commercial and residential systems that might have been orphaned by their initial installation company.

Partnering

Most people’s initial reaction to partnering comes with resistance. ere’s a tendency to want to do it all, turn-key for your customer. It’s a natural desire to manage everything under one umbrella. But what if there was another way that makes it a winning solution for all parties: your customers, your partners and you? e framework I'm about to describe will come from your experience, your background, and ultimately your strengths.

Take a look at yourself, as a business person. What are you best at? What do you enjoy doing the most? Are you happiest when connecting with customers and sharing information with them? Or are you happier running conduit, pulling wire, and installing solar panels and inverters? Would you rather be in the accounting department, or developing land deals for a solar farm? Do you prefer spending time craing public policy at your local legislature? Clarifying what you’re best at is never easy. When I say this, I’m oen referring to the people at new or smaller companies. ese are the managers that $nd themselves doing everything in a company. As your company grows, you can relinquish certain activities to others and this time of transition affects everyone differently.

In order to know how to structure a partnership, you need to know yourself $rst. If you are happier installing things but you want to learn new and better ways to do business development, you could eventually $nd people that want to install things so you can get out of that role completely. is is something that will require you to develop a systems approach to segueing from one role to the next so things are done to your satisfaction and standards. You also need to develop trust and instincts for $nding people to replace you if you are to focusing on replacing your core competencies.

You need to get real clear with yourself and identify your strengths as they relate to your business. If you don't trust people even aer you've given clear directions, and you get upset when things don't go the way that you expected,

partnering will probably be challenging for you. is is seen oen in many small businesses that are characterized as “one truck operations.” ey never want to grow because they think they can do everything the best and trust very few with performing the work. is is acceptable for some, but the likelihood of an exit strategy happening is slim. Or, you might just “own a job,” as most entrepreneurs, managers, and leaders direct and inspire others while $nding people to do the work that they used to do prior to their current role.

As we look at partnering further, what part of the supply chain do you want to really be in? If you're really good at connecting with people and you have a strong marketing background you might want to consider other electrical contracting $rms that are licensed and insured and know how to install solar systems to be your partners. ey could appreciate the steady stream of work because they might not like to sell work, do know how to “bid” work, and are happy simply installing your work. e same goes for commercial solar companies. Find roo$ng, concrete, carpentry, and other relevant partners to work with to allow you to focus, keep your overhead low, and develop successful projects.

In an example of partnering, you will do all the marketing, advertising, design, and engineering and then outsource installations to a competent $rm. You will have systems in place so they can go out and prequalify a project prior to you providing the customer with the $nal proposal so you can avoid unforeseen expensive add-on work that will surprise you, your partner, and your customer.

“. . . services can all be priced out prior so that you have a clear understanding of what your costs are going to be, and this will eliminate 99% of the surprises.”

If you have been tracking how much time it takes to do installation, then you will know on average what it would take for an outside $rm to do one also. In our industry today, there are many ways to compensate a partner for their services and oen it can be done for a $xed, "at fee. If we use a residential grid, interactive solar system as an example, you can formulate a pricing structure with your new partner using a cost-per-solar-panel-installed method as an example. You and the installation partner will look at historical records over time in your relationship as well as in your own relationship with other partners or, if you do this in house, you'll be able to look at your own books to ascertain how long, on average, things take to install. You could also create ranges on system sizes: if the system is 1 kW to 5 kW, it is X dollars per panel to install the whole system. Whole system means everything: panels, racking, wiring, inverters, etc. You can also subscribe this thought process to any add-on work at a project. is can also be applied to commercial projects, but for these projects you will need to further de$ne the work in its scope to

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delineate the activities that each party is responsible for, so there are no discrepancies to what is and is not included in the pricing.

Whether it's upgrading an electrical service to accommodate a larger system or installing anything in a home, services can all be priced out prior so that you have a clear understanding of what your costs are going to be, and this will eliminate 99% of the surprises. Figuring out what things will cost up front will also assist you in $xing the variable costs that oen come up in projects. You can also create a "at-rate pricing structure for most of these activities, again to $rm up any variable costs. Every company would like to know what their $xed costs are on a project to more accurately predict gross and net pro$ts for planning purposes. is will help you keep your overhead costs low because you will not have to think about keeping your partner busy all the time, unlike many small and large businesses that have to think about this every day.

Having people employed at your organization can put a lot of stress and expectations on you as you must keep them working all the time. By $nding partners, whether they are used for your spillover work or they are your sole source for installation work, or any work for that matter, it becomes a win-win situation. Sure, many will argue that you don't have any control over partners. Well if you think about it, you really don't have any control over employees or anyone else for that matter. It's not about fear but about mutual success, and you need to look at it like that. Expectations, if communication is there from the beginning, can be managed.

is is how companies grow, not just organically, but it's also how companies, like my own, are acquired. Larger companies are always looking to partner with companies that they believe are savvy, conscientious, and honest and share the same values. While it can be difficult for an entrepreneur to step back from his or her ego to look at partnering or being acquired, it can also be a big step in personal growth. Being nimble in the solar business today and well into the future will be the hallmarks of your success.

“ . . . partnering for success in the third and fourth quarters of the year is critical.”

As you start to carefully analyze your numbers, through the budgeting exercise and constant activity at your company as it relates to sales and operations, you'll get more familiar with your numbers as they relate to subcontracting. What I'm driving at here is when you realize what it costs you to have staff and support them, direct them, manage them, and carry them when work is slow, you could see an opportunity to truly partner and/or subcontract out aspects of your work that you know and believe could be better managed elsewhere.

Sometimes companies offer their services for less than what you can do them for at your company. So there are times when going down this road is applicable and makes good business sense. Some companies just have lower costs structures for various reasons and by partnering, both companies win.

Historically in the solar industry the fourth quarter of the year is when tax credits usually drive the buying behaviors of consumers and that is when the work is intense. Incidentally, the last month of the year tends to be the most chaotic and ironically the time when companies and people would like to wind down for year-end celebrations. So partnering for success in the third and fourth quarters of the year is critical. Plan ahead for the rush of business that almost invariably happens, like a perennial event, in the last quarter.

Scaling Up Successfully

Scaling up is perhaps one of the most challenging topics in business, especially as it relates to construction activities similar to solar. Our business is not like a factory where machines do most of the work and they can operate for 24 hours a day. Combining labor and materials in an environment that is unpredictable can be challenging, as each and every home that solar is put on is a bit unique, unless you're in a planned subdivision. e commercial and industrial side of the solar business can be like a factory, but you also have weather, logistics, and the people factor to contend with.

At the core of getting scale, it simply boils down to your ability to grow your company efficiently, but more importantly, effectively. I’ve mentioned this as it relates to productivity, but now I discuss it in the correlation to growth. What I mean by effectively is that you must be able to grow your business and make more money as a result of taking on more risk.

Unlike manufacturing, where they just add an additional line or increase the run on the machines from 12 hours to 24 hours a day and add another shi or two, this is a different ballgame altogether. Scaling up comes back to the idea of partnering and scaling simultaneously, or the other possibility is to buy a competing business to merge talent and gain more entry points to potentially well-established markets.

In my own business as well as companies I consult with, either sales leads or lags as it relates to the manpower requirements from $eld installers to project managers and the warehouse staff. is becomes challenging to budget when there is usually a lag occurring with materials due to the capital intensive requirements associated to the cash "ow available to manage multiple projects simultaneously.

ere is no easy answer to this complex and constantly evolving "ow in the solar business. Sixty years ago, the

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solution to this was in the form of labor unions that effectively became a resource base to address this problem. With the explosion of solar across the globe, many of these labor organizations were a bit unprepared for the amount of work that blossomed as a result of incentive programs. is is why partnering has worked so well across different business sectors, like roo$ng and carpentry, that work closely with electrical contractors to orchestrate the installation of solar projects.

“don't let your ego get ahead of your capabilities.”

e advantage for partnering can also be seen with the large-scale solar farms that have been developed around the globe. ey all became partnerships with different tradespeople performing very speci$c tasks as the work can be very specialist-oriented with the various demands for unique skills. Partnering didn’t stop on the structured $nance of projects either. Many deals were also done through partnerships with lending institutions, hedge funds, venture capitalists, insurance companies, and the like.

Making more money in the solar business can come in many forms. Organic growth methods (increasing services to existing customers) or hiring 100 people for your sales force are just some of the ways this can be achieved, but $rst identifying what your strengths are will trump traditional methods, which can be counterintuitive to how money is made in solar. If you're uncomfortable with any of the methods mentioned about scaling up and partnerships, I would strongly encourage you to, again, begin with a budget and manage labor costs as they relate to kilowatts installed. Figure out how much you can install in a calendar week, month, or year and have your company sized appropriately for the amount of work that you believe you can successfully perform and don't let your ego get ahead of your capabilities.

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Solar PV Web Marketing Practices and How to Beat the Big Guys.By Peter Troast

Everybody knows that marketing is in the midst of massive upheaval. e rise of Online, the death of the Yellow Pages and most print advertising, the incredible growth in social media. Combine this with the fact that in the solar industry, large, national companies have piles of IPO cash and are spending money like drunken sailors to capture market share. All in all, it makes for a confusing soup. But, there is good news — in this fast changing environment, small, local solar companies that do it right are uniquely positioned to win.

Benchmarking the Big Players

At Energy Circle, we watch the tactics of these major players closely, and we see the following core tactics dominating the world of solar marketing. ese are the programs that small, local competitors need to be aware of, and need to match if you’re going to win.

Lease Financing

e concept of solar leasing has revolutionized the solar market.

Strong, Well Communicated Brands

ings like quality advertising, name recognition, and appearance of professionalism.

Aggressive Inside Sales & Telemarketing

e big solar corporations boast multitudes of telemarketers whose job it is to conduct evaluations over the phone.

Exceptional Websites with Tools and Calculators to Evaluate Solar Potential

All the national players have beautifully designed, highly functional websites that provide great user experiences.

Robust Customer Referral Programs

SolarCity, for example, offers its customers $400 for successful referrals and has publicly stated that this is very successful (and, not surprisingly, a major part of their marketing expense.)

Marketing is Changing. Duh.

You don’t need to be an expert to know that the way contracting businesses acquire customers is in the midst of massive upheaval. In the past, we could rely on one or two tactics to drive the bulk of our leads--like the Yellow Pages or Direct Mail--but in today’s world the marketing “quiver” needs more arrows, and we’re lucky if any one approach amounts to more than about 20% of our leads. e bottom line is that we have to be good at a lot of things to win in this environment. And while this may sound intimidating and overwhelming at $rst, there is good news. e approaches that work today are less costly, require less commitment and, as a result, do not put your precious marketing dollars at risk of failure.

e new world order is to try, test, measure and adjust.

Success in today’s marketing world means using a range of tactics. At Energy Circle, we’ve found that in a typical marketing program, no one tactic delivers more than about 15% of your required leads. So, if you follow this math, you’ll need 6 or 7 different programs in order to accomplish your goals. Yet, it doesn’t have to be intimidating—using the new approaches is less committal than the old approaches, less costly and less risky.We won’t touch on each of these tactics, but here a few of the critical ones that we believe every solar business needs to do well in order to succeed.

Old and DyingHigh Commitment, Cost & Risk Old and Living New and Thriving

Low Commitment, Cost & Risk

Yellow PagesPrint

TVTelemarketing

Radio

Word of MouthVehicles & Lawn Signs

Direct Mail & Door to DoorPresentations

Home Shows & Open HousesLead Generation Programs

Primary WebsiteGoogle+ Local

Organic Search & Paid SearchFacebook & TwitterEmail Newsletters

Group Buying

State of Marketing Channels

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9 Tactics that Should be Part of Solar Marketing Plan

Your Company Website

Your website serves two core purposes:

• It is the first place most prospective customers will go to check you out (so it better not suck.)

• If setup well and maintained, it will be a permanent and ongoing source of leads by capturing people searching for solar in your community.

Usability

To maximize potential, ensure that your website boasts a professional appearance. Additionally, it’s important to make a personal connection with the customer—this is where having a good “About Us” page, an explanation of your company’s philosophy or approach, and landing pages become important. Aer all, a customer might assume that a company who does their website halfway does the job halfway.

e $rst rule of writing for the web is to keep in mind that people tend to scan content. Structure your pages with sections and headers to make the scanning process easy. Use the header settings on your content management system to highlight these sections and use your keywords in your headers. When a search engine robot scans a page, your headers are one way to signify that a particular term is more important than others.

Ask yourself if your site has a clear Call to Action, or CTA, an invitational, non-intimidating reason for prospects to get in touch with you. e key metric to be thinking about on your site is how many visitors to your site (traffic) convert to a call or signup. In solar, many companies now offer a Free Solar Audit and with satellite mapping technology this can be done at the desktop. To a homeowner curious about their solar potential, that’s compelling.

Great Content

e $rst step towards winning the battle for search traffic is to make sure your site is populated with content that matches those searches. Without a great page on “solar photovoltaics” you are unlikely to rank highly in search for that term. So it is critical to begin with a keyword strategy.

anks to Google, data about which terms get more search is open, at your $ngertips and costs nothing. Good web strategy begins with a clear understanding of the keyword landscape, and targeted content aimed at the search terms most relevant to your particular business strategy. Depending on your niche within the solar energy market you’ll want to identify which keywords drive the highest volume of search traffic for your services, and focus on those.

Oen, the data is surprising and not always intuitive. Check out the global search volume comparison between “solar pv” and “solar photovoltaics”. As you can see, “solar pv” is a much more searched-for term than “solar photovoltaics,” so as a general rule it would be a good idea to use “solar pv” in your on-page content more frequently than “solar photovoltaics.” Do a little research with the tools mentioned above to see how these terms compare with others. Because the concepts of the solar industry are not well understood by most homeowners, there is a mix of scienti$c and shorthand terms to consider. e term “solar photovoltaics” is the technical term but is outpaced in search by the phrase “solar pv” by a factor of almost 17. “Residential solar” might be the industry jargon but people are using “home solar” in their searches at a factor of 4 to 1. And you may think of yourself as a “solar installer” but if you use that term instead of “solar installation” you’d be missing out on almost double the search volume. Resist the Resist the temptation to “stuff ” your pages with too many keywords. If you’re overusing a keyword to the point of a page being awkward to read, you’re probably guilty of stuffing.

While it is important to have a clear keyword focus, it’s equally critical that you have a clear strategy around the geographic service area you want to win. Whether by the user or the search engine, the search is likely to be “localized” to “solar pv, los angeles.” e challenge is that few of us concentrate our business in just one city or town––we have service areas––so we need to win in multiple places. ere isn’t much to be done about the physical location of your company. at address is the primary one Google will use to “locate” you. List your address clearly on your Contact Us page and in your footer.

Driving Lead Traffic

While organic traffic—that which comes through winning search—is great, it is not going to $ll your pipeline. It is very important that your marketing effort include active lead generation tactics. As the world of marketing continues to change at a stunning pace, your program needs to be diverse, "exible and highly measurable. Historically, contractors could rely on a couple of primary approaches—say a Yellow Pages program and some direct mail—to drive most leads. Today, unless you deploy door-to-door canvassers like SolarDirect, it’s very difficult to rely one particular approach to generate most of your leads.

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Additionally, your website plays a crucial role. Even if a prospective customer chooses to get in touch with you by phone, there’s a very strong likelihood that they decided to make that call aer thoroughly checking you out on your website.

Branding with Trucks and Lawn Signs

Lawn signs and vehicle branding are one of the unsung heroes, and oen missed opportunities, of solar marketing. Your trucks are rolling billboards, and oen a huge canvass for your message. e opportunity on your trucks is much more than just displaying your company name, phone number and website. Ask yourself if your trucks have a message. Take a lesson from the famous head turner of many air conditioning companies: Your Wife is Hot! People seeing that truck are not likely to forget it. Also remember that a lawn sign posted during and aer an install is as much for the homeowner as it is for you. Have a message that a homeowner would be proud to display, and they’ll leave it in place long aer your crew is done and gone. is House, Powered by the Sun!

Community

Renewable energy is a hot topic, and an interesting one, yet most homeowners are generally uneducated about its bene$ts, potential and cost. is makes for the perfect opportunity to get out in your community and talk about what you do. Clubs and service organizations are typically starved for interesting speakers, and if you can pull together a solid presentation with decent photographs, over time you’ll give the talk in your sleep. Non-pro$ts are always looking for donations, and a free solar assessment is something many people want, particularly at one of those well lubricated charity auctions. Also, look for where your customer demographic is gathering. e local food movement is a hot one in many communities, and very much aligned with the type of person interested in renewable energy. Many solar companies have had great success with a booth at the weekly Farmer’s Market, at a fraction of the cost of the Home Show, and every week to boot!

Direct Mail

While clearly one of the “old school” tactics, we $nd that well executed direct mail can be important. Radius and other geographically targeted mailings using the Post Office’s Every Door Direct Mail program reduce postage costs to $.145 per piece. ey’re a great way to announce that you’re in the neighborhood (how about: free solar assessment while we’re on your street?) or to target similar housing types that are especially ripe for solar. Or that neighborhood full of well-to-do folks that are environmentally minded. It is important when thinking about DM, however, not to measure it in isolation. A single postcard probably won’t light up your phone lines unless it’s coordinated with other tactics like door to door and PR. And make sure your Call to Action--the offer or reason that someone should contact you-is compelling.

Social Media

You don’t need to like Facebook, or be active on it personally. However, in our view, it is no longer optional for solar contracting companies. If word of mouth has always been our very best marketing, think of Facebook as word of mouth on steroids! When your customer proudly shows off the gleaming photo of their new roof full of PV, and your company is mentioned, that transmits to all of their Facebook friends. Get just a few people to display their envy by sharing the Jones’ photo and you’re spread to all their friends too. Google+ is up and coming, and has disproportionate value in search because....well, it’s Google. It remains a bit of a ghost town, but content links there are very important. Twitter is optional, in our opinion, but can be very effective. But how do you staff this newfangled social media,  you ask? e best examples in our industry are when some member of your crew who has an orientation towards social media (and typically is under 30) raises their hand. Alternatively, a twenty something intern can be very productive.

Paid Search

As all Google search users know, the real estate on a search result page is increasingly dominated by paid ads--what Google calls Adwords: the listings at the top and in the right hand column of a search. If you haven’t tried these, they’re charged each time a user clicks on them (hence the name pay per click advertising or PPC) and can be a high impact and reasonably cost effective approach. If you’re going to try PPC, it’s very important to understand your cost per acquisition economics. Solar keywords, given the value of the install, are typically expensive terms to buy in paid search, so you might end up paying $5 to $10 for every click. So the rate at which you convert a click to a lead and then a lead to a job is critical.

“the rate at which you convert a click to a lead and then a lead to a job is critical.”

If it takes 50 clicks to get one job, you could be spending as much as $500 for that one piece of business. A mistake many companies tend to make in PPC is not having dedicated pages designed speci$cally for your campaign. e right way to approach this is to have a dedicated “landing page” for each of your major ad groupings, essentially a content page with form submission form on it. is way you can create pages that are highly relevant to the ad (Google will reward you for this) and, most importantly, have a clear and easy way to measure whether your campaign is performing. Once metrics like this are in place, it becomes apparent in short order whether your dollars are being well spent. And that is one of the beauties of paid search--put a little bit of your budget on the table for a month or so and see if it performs. If so, rock on. If not, shut er’ down. Compare that to the old Yellow Pages program in which you had to sign an annual contract for regardless of performance.

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Local Search

A relatively new phenomenon on the web is the whole area of “local search.” For virtually all terms related to solar, Google and the other search engines pre-determine that the searcher is looking for someone to purchase or install a solar system and orient the results to companies providing those services in that locality. When Google detects this, the search engine displays a blended result--combining your primary web site, a map, and your Google+ Local page (formerly known as Google Places.) So it is increasingly critical to perform well in these local search results. Step one is to make sure your Google+ Local page is in place and well cared for, because if you don’t have one, you CANNOT be included in a blended result. As I like to say, you have two websites--yours and your Google+ Local page. It’s important to make sure this page is solid. Fortunately, it’s not too difficult to keep up. Add photos and videos and try to keep it looking fresh. Most importantly, keep a steady stream of reviews from your happy customers. We see a strong correlation (remember there are no guarantees when Google is concerned) between review quantity and blended search performance. Just be careful not to get a bunch of reviews all at once (Google sniffs this out) and never fake or incentivize reviews. If they catch you doing this, you’re toast. Once Google+ is taken care of, then do the same for Bing and Yahoo. ey’re $ghting over the remaining 30% of search traffic that Google doesn’t have, but have relevance beyond their volume. Lastly, be cognizant of your

links and citations--references throughout the web to your company. is is one of the ways that search engines algorithms measure your company. Firms that have lots of mentions and references and links are looked upon more favorably, because the search engines treat this as a validation that your company is legitimate, established and well-liked.

Referral Programs

If you have a system for identifying your most satis$ed customers--your “promoters”--these people are naturally inclined to recommend you to their friends. But when you put some incentive behind referrals, you can create a machine capable of driving a signi$cant part of your business. And when the incentive is only paid on the job (versus the lead), there is essentially no risk. As long as you know what cost per acquisition your business model can afford, you’ve theoretically got that much to offer as a referral incentive. Many of the larger national players in solar pay hundreds of dollars for each closed lead. We don’t think you have to offer $nancial incentives necessarily, but you know your customer base best. If you think they’d be motivated by $250 for every referral you close, why not try it?

If any of these ideas make sense to you, dive in and give it a try. Remember: e new world order is to try, test, measure and adjust. Good luck and let us know how it goes.

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ASHP vs. GSHP: MAKING AN APPLES TO APPLES COMPARISONBy Doug Carruthers

IN THE REAL WORLD, ASHP efficiencies can vary from rated by as much as 22% in cooling and 50% in heating. In many areas, it can be difficult to make the case for a ground source heat pump (GSHP) over an air source heat pump (ASHP).

e nameplate efficiencies of ASHPs combined with their lower cost of installation make them an extremely attractive alternative for the energy (and cost) conscious building owner. As a geothermal system designer, or geothermal system salesman, the case you always have to make is one based on long term cost projections. In order to succeed in that argument, you need to be sure that you are making an apples to apples comparison of the operating cost of each system based on the installed location.

ASHRAE research has shown that in the real world, air source heat pump (ASHP) efficiencies can vary from rated by as much as 22% in cooling and 50% in heating. It isn’t that rated efficiencies are wrong - it’s just that they aren’t meant to model actual equipment performance. ey are meant to offer a baseline for comparing one ASHP to another ASHP.

Location Matters

For air source equipment, the ARI rating system used to determine published efficiencies is based on operation in the relatively mild weather of Climate Zone IV. e original intent of the rating system was not to generically predict operating efficiencies for any place in the country, but instead to develop a performance baseline for quick Air Source to Air Source equipment comparisons.

In practice, advocates of air source equipment and, much to their own detriment, geothermal system designers have treated these reported efficiencies as gospel. But if we stop to think about how heat pumps work (air and ground source alike), we realize that their efficiencies are inherently dependent on the temperatures of their sources/sinks. So, if we take a heat pump rated based on the temperatures of the Texas panhandle and install it in Maine, we can not expect the same efficiency.

For GSHP system designers, most of the available programs (such as LoopLink) account for the effect of varying entering water temperatures, pumping energy, supplemental heat operation, etc. on overall system efficiency. But because those programs don't model air-source equipment in a similar manner, estimated values of their efficiencies are needed to make operating cost comparisons.

If designers simply use published HSPF and SEER values for long term cost projections, air source equipment is given an unrealistic advantage. To combat this problem and provide home/building owners with a more accurate projection of the long term cost of operation for ASHP vs. GSHP, we need to turn to the good people of ASHRAE.

ASHRAE Research Makes Oranges Look Like Apples

In the June 2004 issue of ASHRAE Transactions, "Climate Impacts on Heating Seasonal Performance Factor (HSPF) and Seasonal Energy Efficiency Ratio (SEER) for Air Source Heat Pumps" was published (Fairey, P., D.S. Parker, B. Wilcox and M. Lombardi). is document was made available on the heels of research that showed how much ASHP performance depends on climate and it provides us with the tools necessary to:

• Adjust rated ASHP efficiency based on Outdoor Air Temperatures (OAT in °F)

• Compare ASHP operating cost to GSHP operating cost more accurately.

e great thing about the research was that they condensed everything down into two equations that you can use to account for the variation in ASHP performance according to the outdoor design temperatures for a given location. e equations are fairly simple to apply but they get even easier with soware. is article was actually started right aer we built these equations into LoopLink’s Operating Cost Analysis. Below, you can see the equations and procedure for making the adjustments.

How to Apply ASHRAE Equations

HSPF Equations

1. Diff = a + b * OAT + c * OAT2 + d * Rated HSPF

2. Adj. HSPF = [1-(Diff)] * Rated HSPF

HSPF Coefficients

Rated HSPF < 8.5 Rated HSPF >= 8.5

a= 0.1392 a= 0.1041

b= -0.00846 b= -0.008862

c= -0.000107 c= -0.0001153

d= 0.0228 d= 0.02817

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Example Variables

Rated HSPF = 8 OAT = -11°F

Example Problem

Use Equation 1 to $nd your adjusted difference (Diff). Find values for the constants a, b, c and d in the HSPF Coefficients table.

Diff = a + b * (-11°F) + c *(-11°F)2 + d * (8)Diff = 0.40171

Use Equation 2 and your answer from Equation 1 to calculate your Adjusted HSPF (Adj. HSPF).

Adj. HSPF = [1-(Diff)] * (8)Adj. HSPF = 4.79

SEER Equations

1. Diff = a + b * OAT + c * Rated SEER

2. Adj. SEER = [1-(Diff)] * Rated SEER

SEER Coefficients

Rated SEER < 13.5 Rated SEER >= 8.5

a= -0.5655 a=-0.5864

b= 0.005414 b= 0.005668

c= 0.01039 c= 0.01029

Example Variables

Rated SEER = 20 OAT = 85°F

Example Problems

Use Equation 1 to $nd your adjusted difference (Diff). Find values for the constants a, b and c in the SEER Coefficients table.

Diff = a + b * (85°F) + c * (20)

Diff = 0.10249

Use Equation 2 and your answer from Equation 1 to calculate your Adjusted SEER (Adj. SEER).

Adj. HSPF = [1-(Diff)] * (20)

Adj. HSPF = 17.98

ASHRAE Equations Applied

Using the outlined procedures, we created the following reference table/graph to show how nominal HSPF and SEER ratings will vary when adjusted for operating conditions by project location. e values in the table assume that the

nominal ratings for the ASHP were HSPF=8.0 in heating and SEER=20 in cooling.

A Simple Case Study

In the end, the adjustment of HSPF from an 8.0 to a 6.45 or a SEER from a 20 to a 17.41 seems insigni$cant, but these deceptively small changes in efficiency add up a lot when the percentage of change is applied to the annual operating cost of the system. Consider the difference in estimated operating cost for an ASHP system installed in Brookings, SD when we adjust our efficiency for operating conditions versus using the rated efficiency.

For simplicity, we will only look at the difference in heating costs and we will stick with a rated HSPF of 8.0. If we assume an electric rate of $0.12/kWh and an estimated heating load of 30,000 Btu/hr. e last piece of information that we need is the design minimum OAT which in Brookings is -11°F.

Using the rated HSPF we have an estimated operating cost for the ASHP of $1,000 annually. If you apply the adjustment equations and use the more accurate location adjusted HSPF of 4.79, your annual operating cost jumps to about $1,700. at’s seven hundred dollars difference- every year... and we aren’t including the difference in cooling cost. e impact is signi$cant over the short term, but compounds dramatically over the long haul.

Efficiency adjustment isn’t just an issue of helping to make geothermal look $nancially better than air source systems. Failing to adjust the rated efficiencies of ASHPs based on location, provides your customers with incomplete information. Applying these equations may swing the economics to favor geo (or not). It is isn’t important that geo win every time. e important thing is that the information you present your customers is the most accurate available, and that the heating/cooling system they select is the best $t for their budget and lifestyle now and into the future

SIMPLY PUT…

• Rated efficiencies are not and never have been designed for projecting long term operating costs. ey simply supply a standardized reference point for assessing the merits of like systems.

• ASHPs are not the enemy. Air source heat pumps have their place in the world and are well suited for many HVAC applications. e point of this article is that when projecting long term operating costs for air source equipment, using rated system efficiencies will result in unrealistic costs.

• If competing against an air source heat pump for a geothermal job, the best case you can make is based on long term operating cost. Make sure that you ask whether your competitor has adjusted their efficiencies based on actual operating conditions. If not, hand the building

16

17

owner (and your competitor) this document and explain why adjustment is so important.

• Geothermal systems are also subject to efficiency variability due to operating conditions. Make sure that your design is honestly accounting for variations from rated conditions. When in doubt use soware and get trained in how to use it correctly.

DON’T FORGET TO MENTION…

A lot of system designers and salesman stick with the straight up economics of geothermal as reason enough for the purchase but there are other advantages that should not be forgotten.

Comfort

Geothermal systems have much better cooling and dehumidi$cation capabilities than air source equipment

because the temperature and relative humidity of the outside air don’t affect heat rejection underground.

For those way up north, the geo system also offers warmer air temperatures coming through the registers than air source heat pumps during the coldest days. Again, this is because the ground temperature doesn’t swing like the air temperature.

Maintenance

Geo systems are simple. ere aren’t too many moving parts to break and the only regular maintenance item to worry about is the air $lter. ere is no coil exposed to grass clippings, no unit sitting outside in the elements... everything is either in the utility room or underground. is results in less maintenance and a longer service life for a geo cabinet.

Hot Water

Geo systems are the only heating and cooling solution that can handle 100% of your spacing heating as well as some or all of your domestic hot water generation. One machine to rule them all!

Positioning Electrical Distributors for Solar GrowthBy Fred Paris

Have we seen the current marketing conditions before?

It common for a new market to appear and those in the best position to capitalize on the opportunity just look on as others carve out market share. is is happening right now with the solar PV industry and the electrical industry, and I want to make sure the electrical industry gets in on the business.

In the 1980’s, the telephone companies watched as MCI, Sprint and others started carving up the long distance (LD) market. ose same telephone companies are in the LD market today, but share the market with many LD carriers. Licensed electrical contractors watched as low voltage contractors not only captured computer and telephone wiring, but also worked for and got new low voltage licenses approved. With this legislation, they locked themselves to market share that electricians might have today. IBM ignored the PC business until Apple and others proved the market. IBM was focused on mainframes or making to PC mainframe comparisons. Apple was at 50,000 feet, working an unfolding new market. Yes, IBM is in the PC market today, but they will be sharing the pie with Apple and many others forever. How long did it take the phone companies to offer television? Yes, there were regulatory hurdles but it the beginning they did even think of it as their business. ey clearly did not have the high view.

Today, electrical distributors contemplate the ‘green’ market and ask questions such as: ‘how much inventory will we need to

18

carry? What happens if we stock solar panels and there is a jump in technology? ese are clearly tactical questions. Good questions if we were just adding another device on the line card; instead, we need to look at this ‘green’ opportunity from a higher altitude, see how things are moving and then work a strategy, stake a claim, and get a big share of this emerging market.

e biggest opportunity for electrical distributors and contractors in more than 30 years is here - and it is Solar PV. So when I ask electrical distributors and contractors about planning, I $nd many are waiting for some kind of sign – perhaps some cosmic message – before they jump into the market. In the meantime, the market channels for Solar PV are solidifying around them with a completely new family of “solar-only” distributors.

Why do we see solar $rms from far off-states moving freely about the country working the regions with the best SREC programs while our local contractors have little or no response?

What can local contractors and distributors do to at least play in this market, if not lock up their regional market?

Lets look at the new guys. Rather then depending on 14 brick-and-mortar branches, these new entities position as web-based supply for a narrow market segment, e.g., solar PV. ey invest in constant training (every-day) and have deep in-house technical support and professional staff. e support staff gets involved in the nitty-gritty of a project with a contractor, helping the contractor close the deal, gain $nancing, and plan the construction process. Since solar contractors are learning as fast as they can, they depend on this support. When we think of on-line supply $rms rational thinking says lower price. Not always the case in a support intensive specialty.

As the solar PV business expands from an early-adopter to early-majority market, electrical distributors have an opportunity to become signi$cant regional suppliers of complete solar PV systems.

So the question is, what marketing strategies might be considered for reshaping the distribution channel from “supply” centric to a “support” perspective, and would distributors want to do that?

From a higher-level marketing concept, we are “repositioning” the distributor as the new focus for capitalizing on regional solar PV markets. e summary below captures the cogent elements of a repositioning plan.

Positioning for Solar - Summary

e electrical distributor starts a new division, specialty, energy group, whatever we need to call it, with the vision that this ‘skunk-works’ will develop the market while “Positioning” the distributor as the regional go-to supply for solar PV.

e distributor solicits a limited number of contractors (no time wasted with generic train-everybody approach) from their customer list as members and directs the development

of a focused market development initiative. Contractors and distributors receive technical training, how-to experience, and local savvy on methods, procedures, and administrative requirements for getting solar projects installed. e new division is selling projects but not in competition with the contractor. e distributor advertising is offering solutions, with an “Ask you contractor about”… approach. An approached used in pharmacology when they suggest you ask your doctor about… whatever ailment their stuff $xes.

e point is that the distributor drags the contractor to the project rather then waiting for them to mature. At the same time, we implement the training center and support strategies. Finally, we help our contractor members gain professional certi$cation.

Trends to Guide Marketing & Support for the New Solar Division

• Traditional electrical supply business has been hurt by the explosion of web-based suppliers with 24 hour delivery

• Use training and support as business relationship assets to lock key contractors to regional distribution

• ose few electrical contractors that work with solar do not turn to their electrical distributor for solar PV

• Increase visibility, offer contractor training, offer the contractor a path to NABCEP certification, business training, regional business savvy

e rate of new energy services and products is coming too fast for traditional contractor education methods to be effective.

• e distributors’ position between the contractor and manufacturer can be leveraged as the distributors’ role of supplier evolves to include that of a contractors’ ‘partner’. e distributor is positioned as the “source of regional solar knowledge.

• Other strategies to lock a contractor in - do some of their paperwork. Unloading the burdensome repetitive paperwork of rebates and utility interconnection applications and such.

• is is not the old “lunch and learn” distributor training, this is a Distributor Learning Center based on a new market positioning initiative.

• We need to move training closer to the field. Renewables such as solar and wind have significant local laws and codes – another opportunity where local training at the distributor level works. Lock them in with support.

Few distributors are up to speed on solar energy, and the trade schools and technology schools are just starting their PV programs.

Turns out that the solar PV business is 90% electrical. Consider specialty training as relatively quick $x.

Distributors can be offering both technical and regional business savvy training. Locally focused training on methods

19

and procedures required for regional government and municipalities. Distributors are regional in nature – this is a signi$cant competitive advantage.

Using their logistic positioning related to contractors, distributors might centralize key activities – say rebate processing, utility interconnection, SREC applications and more, unloading these tasks from contractor members.

Other than their ‘on-line’ businesses, distributors and supply $rms are regional in nature. ey know their customers by name, they know the local electrical inspectors, and they can quickly learn the tax and rebate programs and processes. Today, with web-based suppliers offering some advantages, positioning as the regional leader for solar requires a proactive program of training and contractor support never before required. e key for distributors is to $rst recognize this as a new business model, then leverage their regional strengths while building the local market.

e electrical distributor begins with a whole-new initiative, call it a department, product line, line-of-business, whatever. e measure of seriousness is gauged by giving this skunk works, autonomy, a budget, and a sales goal.

About the author: Fred teaches HeatSpring’s Solar PV Boot Camp training, with an emphasis on business and project management lessons

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“ADJUSTABLE POST 10-30°”

“NO MORE EXCAVATING”

20

How SREC Price Assumptions Can Impact Solar PV Project IRRs By Chris Williams

Calculating the the un-levered (no debt), internal rate of return (IRR) of a commercial solar PV project is key to selling the project to the property owner, or getting investors on board for $nancing. If you’re still using the term “payback” or “return on investment” to sell commercial projects, you’re behind the ball.

is very speci$c example is the best way I can think of to illustrate how just changing the assumptions for one critical value - the effective value of an SREC - can widely change the economics of a project.

For this article, let’s evaluate a project for a straightforward commercial solar PV client, then take a look at how different assumptions of SREC value can impact the project’s IRR and the strategy you should employ when selling a project. We’re going to be looking for the IRR over 20 years, because the length of bankable solar projects with equipment warranties.

SREC Pricing Options Cost/MWh

20 Year IRR

Take the nominal value of the last closing price. $210 12.670%

Take the nominal SREC price, assume that it will never go lower than this, and reduce it by the effective corporate tax, rate in this case 30% to calculate it’s effective value

$147 10.110%

Ask around and get 3 year long term contract. currently around $175/MWh currently (source anecdotal from Jason Gifford at Sustainable Energy Advantage). Although this is only three years, assume this will be the lowest price over a 10 year period, i.e. aer the 3 year guaranteed contract you can sell it on the spot market for more.

$175 11.250%

Take the the 175/MWh and reduce by 30% for taxes $122 9.110%

Key Learnings from a Simple Sensitivity Analysis

Your assumptions on the effective value of an SREC have huge impacts on the economics of the project. The difference between 9.11% and 12.67% is almost 40%.

Remember you need to pay taxes on SREC income. Understanding your client’s tax rate is critical to building your model.

In sales, you need to model the worst case scenario to build trust with the client. If the client asks an accountant something and he points out an issue that you did not address, your credibility has been lost.

Project Assumptions

• Customer Sentiment: e customer a distribution of paper products on the North Shore of Massachusetts. It’s a family owned business, they own the property and plan to for the next 30 years. ey business is pro"table, so they are going to buy the system cash, and they have a tax appetite to accept all of the tax credits. e business is paying a corporate tax rate of 30%. is will be critical for calculating MACRS depreciation value, and effective SREC value.

• System Size: 200kW

• Gross Installed Costs: $4.50 per watt

• O+M: 05% of the gross installed costs per year for 20 years.

• Derating: We assumed 20% loss of power going from DC and AC

• Production: We assume 1.3 MWh of production per 1kW installed per year.

• Value of Power: $.12kWh. Again, remember that commercial properties tend to spend more cash on demand chargers rather than usage charges. We can’t assume solar will reduce demand charges because timing and clouds can’t be controlled.

• Tax Credits: 30% Investment Tax Credits and 5 Year 50% Bonus MACRS Depreciation

• We assume the electrical in$ation rate will be 3% per year.

If you need background reading on finance basics; NPV, IRR, discount rates, time value of money, why not to use payback period. Read this: blog.heatspring.com/renewable-energy-financing-101/

For a solar PV specific finance review; how to calculate MACRS, SRECs vs FITs, etc, read this: blog.heatspring.com/solar-project-financing/

Are SREC Taxable? Read this article: blog.heatspring.com/are-solar-renewable-energy-credits-taxable/

Related Resources

21

Simple Control Strategies for Heat Pumps with Radiant Heating and CoolingBy Greg Leupin

With an energy output of up to 4 times the energy input, it’s easy to understand why geothermal and air source heat pumps are an increasingly popular choice for hydronic applications. Bene$ts such as higher efficiencies and integrating heating and cooling capabilities make the use of heat pumps an attractive solution. To operate these types of heat pumps effectively in a hydronic application, a proper control strategy must be in place. Matching the mechanical piping arrangement and the control strategy together will ensure the entire system can be coordinated to seamlessly work together, improving performance and reliability.

e $gure below shows a piping solution for a 2-pipe heat pump application that includes many of the typical loads seen in a system including radiant "oor or ceiling zones, fan coils, a backup boiler, DHW and some high temperature loads such as baseboards. is piping arrangement can also include cooling capability through the fan coils and also through the radiant "oor or ceiling. However, integrating heating and cooling together in a 2-pipe system can be challenging because only heating or cooling can be supplied at any given point in time.

Today, heat pump systems are typically installed with stand-alone thermostats that control the zone temperatures by turning on the zone valves. Independent setpoint controls are used to operate the heat pump to maintain the tank temperature. e challenge with this control strategy is the ability to create a proper interlock between the heating & cooling operation and make sure the thermostats know when chilled water or hot water is available. To create an interlock between heating and cooling, many contractors use summer/ winter switches or outdoor temperature limits. is strategy requires additional wiring with isolation relays creating complexity in the wiring. A second interlock is also required to ensure the thermostats know which water temperature is available. When a thermostat operates its zone to provide heating, and the tank has chilled water, problems will occur.

Choosing an integrated control strategy will help address these common challenges. Using control logic to consider all parts of the system, a central control will coordinate the interaction between the zones, heat pump, DHW and the back up heat source to work together to improve the overall operation of the system. Communicating thermostats that ‘talk’ back to a central control help determine whether chilled or hot water is required. e central control knows which zones have called for heating or cooling and determines which water temperature to supply. If the control determines that heating is required, the central control will ‘tell’ the cooling zones to remain off. Once all heating zones are satis$ed and they no longer require additional heat, the control may decide to provide chilled water to satisfy the

ExpansionTank

Heat Pump

Boiler

StorageTank

P1

Indirect DomesticHot Water

Fan Coil ZonesHigh Temperature Zones

Radiant Zones

22

cooling zones. is built-in control logic improves system efficiency, reliability & energy savings and eliminates the need for all external wiring making installation much simpler.

Another growing trend in heat pump applications is radiant "oor or ceiling cooling. In order to operate radiant cooling properly, humidity levels must be considered to prevent condensation on the "oor or ceiling surfaces. An effective control strategy includes communicating thermostats with built-in humidity sensing capabilities. Humidity levels are measured and communicated to the central control allowing a minimum water temperature to be calculated based on the dew point. e control then supplies chilled water to the radiant surface at a temperature slightly above the dew point to avoid condensation.

Accurate temperature control is critical to ensure the water temperature supplied to the radiant surface is above the dew point. In the application shown above, temperature control is accomplished by using mixing through a variable speed injection pump (P1). is is a standard pump operated at different speeds injecting chilled water into the radiant loop so the radiant surface satis$es a large portion of the sensible cooling load. To satisfy the latent cooling load, fan coils draw cooler chilled water temperatures directly from the tank. ese fan coils also handle additional heating requirements throughout a building.

e trend to use heat pumps to maximize energy efficiency while heating or cooling a building continues to grow. Incorporating an integrated control strategy is as important as determining which equipment to install. Matching the control strategy to the mechanical installation will make an efficient heat pump system a simple reality. Not only does the communication between the thermostats and the central control allow for proper interlocking, the entire system will work together to get the best performance out of any heat pump.

Greg Leupin is a mechanical engineer specializing in HVAC electronic controls. With over 18 years of experience, he is focused on teaching contractors and designers how to get the best performance out of their systems. Greg is a manager with tekmar Control Systems, A Watts Water Technologies Company. He can be reached at customerservice@tekmarControls.com

Those  who  know,  go  with  Munro!

•  Project  Support  and  Management•  Product  and  Technology  Training•  Business  Development  Support  Services  

From  lead  generation  to  solar  system  commissioning,  and  everything  in  between,  Munro  is  dedicated  to  helping  solar  contractors  succeed.

“Munro  has  been  a  great  resource  to  us  and  has  helped  us  expand  our  business,  both  as  a  distributor  of  top  quality  products  and  with  their  product  knowledge.    We  look  forward  to  a  long  lasting  relationship  with  Munro  Distributing.”

Are  you  new  to  the  solar  industry?    Do  you  need  to  generate  more  business?  Looking  for  some  direction?  

23

14 Trends Driving Renewable Energy in 2013By Chris Williams

e following is a review of the general trends that I'm seeing in the renewable energy industries, with a description of what they are, speci$c citations when needed, and how these trends impact your business. We’ll look at the three forms of renewable energy that are most commonly used in residential applications: solar PV, solar thermal, and geothermal heat pumps.

Our focus is on small and medium size business, working to arm them with the materials needed to beat the big guys. We want to make sure that Joe the Solar Installer can go head-to-head with SolarCity, and win.

Trend #1 - Driving Down Customer Acquisition Costs 

As hardware costs are getting cheaper and cheaper, acquiring customers is becoming more and more the bottleneck of a the business.

A few interesting notes: 

• SolarCity spent 44% of revenue on customer acquisition in 2012. at means for every dollar in revenue collected, $.44 was spent on marketing and sales. Don't do this.

• A report by Berkley Laboratory released in December 2012 says that US installers pay on average $.67/watt acquiring customers, while our German counterparts spend $.07/watt.

• What's unclear in the report is whether these costs are higher or lower in a competitive market, where more installers exist but more homeowners know about solar, or a newer market, where few installers exist but there is less buzz.

How does this impact your business?

If you cannot acquire customers, and if you cannot acquire them cheaply enough you will not stay in business. It will be wise to understand what the average customer acquisition costs are in your area then understand what your customer acquisition costs are. If they are above the average, something should be changed.

Determine what your most pro$table and least pro$table sales funnels are. Eliminate the unpro$table one, double down on the most pro$table, if possible.

If you're an electrical contractor or electrical distributor, you know 90% of the technical material you need to know, you just need to learn about solar but there is tons of policy, marketing, sales, and $nance information you need to learn.

For more speci$cs, see Peter Toast’s article on Solar Web Marketing Best Practices on page 9.

Trend #2 - Reducing Transaction Costs for Financing Light Commercial Projects

ere is plenty of capital for thousands of residential and megawatt solar projects, but less attention is being paid to the light commercial space, an area where there is huge demand and potential. How many commercial projects do you have in your pipeline that you could close if you could $nance them?

e investment in residential and MW projects has been led by institutional banks, they standardized the process and removed a signi$cant amount of risk. e same has not happened for commercial solar projects.

Why have commercial roofs not seen the same financing as residential projects?

• Commercial projects in the built environment have more economic variables than residential projects. Every commercial roof is custom made, and varies greatly in terms of roofing and electrical equipment, compared with residential projects.

• e due diligence required for a commercial project is only slightly less then megawatt projects, but the revenue potential for an individual project is smaller.

• For the above two reasons, it's hard to put commercial projects into a standard due diligence process that each project can go through quickly and easily, each job is custom.

• For the above two reasons, the transactional costs of financing a commercial project by itself can be significant. e total legal and accounting costs for a project, or fund, might start around $40k - $100k. For this reason, it's clear MW projects are the low hanging fruit. It's easier to spend $100,000 on legal fees for a 4MW, $20 million project, then $50,000 in legal fees for a 100kW, $500,000 project.

• Companies that are best suited to sell to commercial PV are companies that have existing relationships: think electrical shops, roofers, general contractors that have existing customers that own huge amounts roof space.

• e investor profile for light commercial is different. Institutional banks are investing in MWs of solar at a time, while commercial investors tends to be buying into 1 or 2 projects at a time. ey tend to be private investors, small corporations, or real estate holding companies with passive income. is can make finding the right investor much more difficult.

6 6 Trends Driving the Solar PV Industry in 2013

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• e contracts and risks are becoming more widely understood, and cheaper, which will reduce the cost to finance a project.

• If you're a solar business owner, executive or manager that needs to learn how to finance commercial solar projects, and you want to get $40,000 of all the contracts need to finance a project, look into HeatSpring's "Solar Executive MBA Training"

Are you positioned well and do you have the experience to sell commercial projects?

• Are you positioned to sell to commercial clients? You answer will be yes if you have an existing book of business. If you're having trouble you need to be more sophisticated in communicating the financial implications of a project.

• If you're serious about commercial solar, do you know how to value a project and screen a project quickly? Can you determine the profitable projects, for your and the client, quickly? hint - "payback" period has nothing to do with it.

• Do you know the different legal structure that can be used to finance a project, what's tax efficient or tax inefficient and why an investor would select one structure over another?

• Do you know how to write a compelling executive summary of the investment so the investor will be interested?

Trend #3 - Big Banks Using Debt to Finance Residential Solar, Competing with 3rd Party Financiers

ere's been a lot of buzz about 3rd party residential $nanciers in the past four years. Some think they're the magic bullet, others not.  It's impossible to predict. ere's one trend that is clear: Larger banks are getting interested and comfortable in solar - offering capital to homeowners that want to buy solar.

ere are pros and cons to everything, debt is attractive to homeowners for one large reason

• Debt can still be no money down, but the homeowner will save more money from day 1 and eventually own the system.

A few other notes:

• ere are two banks currently offering capital for residential property owners GE Capital and Admirals Bank

• If you cannot find a good 3rd party financier to work with, and/or you tried working with one and didn't like it - Try a bank.

How this impacts your business?

By increasing the number of offerings, you increase your ability to sell to more clients. Some clients might demand 3rd party $nancing, while others want solar, don't have the cash, but don't want to $nance.

Trend #4 - General Contractors Are Flooding the Solar Market, Making it More Competitive for Pure Play Solar Installers

ere's a battle going on the solar industry between general contractors and pure play solar installers. It's true that pure play solar guys, the ones that really loved the technology, kept the industry alive long enough to get policy in place that would increase growth, but it's general contractors that are taking things to the next level.

Just to be clear, when I say general contractor, I'm referring to a general, roo$ng or electrical contractor where solar accounts for no more than 50% of their business. Pure play solar installers derive 100% of their revenue from solar projects.

“All the numbers prove it, it's a huge growth industry.”

It's becoming clear that more and more general contractors are getting into the solar industry as fast as possible. It's making life more difficult for pure play solar installers because property owners have so many options. is is a natural progression and it's good for the industry, the key to both surviving is going to be positioning and focusing on their strength.

Why are general contractors getting into the business?

• All the number prove it, it's a huge growth industry.

• General contractor's customers are asking about it. You may turn down a job 1,2,3, or even 4 jobs, but you're not going to turn down 10, $30,000 jobs.

What are the strengths and weaknesses that general contractors need to address?

• Strength: they have lower customer acquisition costs because they have an existing book of business and can cross sell from other projects. Need a service upgrade or new wiring, have you ever considered solar?

• Strength: ey can turn down unprofitable jobs because they have other work to do.

•  Weakness: ey need to get good at sales and marketing. In the solar industry, most customers don't come to you, you need to go to them. 

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How does this impact a pure play solar installation business?

• Double down on sales and marketing. Really understand your numbers and metrics in each sales funnel. You're already better at this and it's how you're going to beat general contractors in the solar game.

• Double down on understanding the financial implications of investing in solar. Contractors tend to have to do a lot of learning about policy and financials, you're already good at this. Make sure your sales team doesn't use "payback". Get lease and debt products if needed.

• Weakness: Keep your installed costs down. Use your volume.

Solar PV Trend #5 - More Transparency and clarity in the SREC Markets will Reduce Risk

2012 was a fun year for SREC markets, and by fun, I mean crazy and unclear. e industry is still trying to $gure everything out.

Notable 2012 Experiences 

• Prices close below the Massachusetts floor price. Everyone wonders, does the floor even exist? It appears the gold standard is no longer.

• Many people start to realize that SREC holders must pay taxes on their SREC income, decreasing the effective value of each REC. Learn more here, "Are SRECs Taxable?"

• New Jersey increases their RPS requirement in an attempt to increase SREC prices.

In 2013, I expect to see more stability and transparency around the SREC markets and here is why:

As markets become larger, there will be less volatility. If the market is small and 10MW facility is put on line, that could oversupply the market, and prices will plunge overnight. As markets increases in size they will be less volatile because added supply will not impact them as much. e same 10MW coming online has much more impact in a market where only 100MW exists, compared to a market where 1,000 MW is online, all else equal.

As more and more dollars get invested, more and more due diligence will be performed and things will become more clear.

State and regulators will get better at communicating what is happening in the market.

How does this impact your business?

• More clarity and stability around SREC prices will remove risk for system owners, decrease risk will means more projects get build. If you're in an SREC market, you

need to be an SREC master. Make sure to study up, HeatSpring has a number of free courses that can help you.

• If you need to become an SREC master, take the Free SREC Course: Understanding SRECs.

Solar PV Trend #6 -  Lower Installed Costs

Hard costs will continue to drop for the foreseeable future until the industry maximizing the economies of scale and becomes a true commodity.

is is simple, but you can't expect it. e relationship has been found that when manufacturing capacity doubles (increases by 100%), the costs of the equipment decreases by 20%.

One of the things that lower manufacturing costs is doing is making manufacturers lose a lot of money. In 2013, expect to see a number of manufactures go out of business. Most manufacturers are losing money, and the only one that will be able to weather the storm are ones with huge amounts of cash in their balance sheets or ones able to raise outside capital.

How does this help your business?

Decreased installed costs help the industry as a whole without helping a speci$c installer or distributor.  It will help the general industry by simply making the technology more available to consumers.

 Unlike the solar PV industry, it's going to difficult to drastically reduce the installed cost of solar thermal equipment, because the components used are already commodity products.  

Although the solar PV industry is growing like crazy, solar thermal is still a large opportunity, it's currently about a $123 billion dollar market. e reason that solar PV costs are

4 4 Trends Driving the Solar Thermal Industry in 2013

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dropping drastically is because each major component is special to the solar pv industry, modules, inverters, and racking. us, each has huge economies of scale to be realized. Solar thermal, on the other hand is already extremely cheap, the majority of the growth of the solar thermal industry will come from the following areas.

Solar Thermal Trend #1 - Policy Will Drive the Industry

Similar the solar PV industry, solar thermal adoption will be driven by states that adopt policies for reducing and/or eliminating fossil fuel use. ere are a number of states currently focusing on solar thermal.

• New Hampshire ermal REC program. SB 218.

• California Solar ermal Initiative

• Arizona has an aggressive solar thermal rebate

• Washing DC has solar thermal RECs

• Massachusetts has number solar thermal programs including cash rebates, and a commercial financing program.

How does this help your business?

With the huge amount is interest in solar pv right now, many people are not focusing on solar thermal, which can be a large opportunity if you're in the right state.

Solar Thermal Trend #2 - Slight Reduction in Installed Costs

Decreased installed costs help the industry as a whole without helping a

specific installer or distributor.  It will help the general industry by simply making the technology more available to consumers.

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As the industry continues to develop in select states, installed costs will drop slightly due to increased training, and by pre-packaging and pre-designing systems.  But we will not see a 40% reduction in installed costs due to labor efficiencies or pre-packaged systems.

Solar Thermal Trend #3 - Increase in Fuel Prices Will Increase Demand

To install "at plate solar thermal modules will cost between $80 per square foot and $120 per square foot depending on the speci$c site, the market, and the skill and experience of the contractor.

us, a 40 square foot module will cost around $4,000 ($100 per square foot) gross (before any incentives) to install. In New England, this module will produce around 100 therms of energy per year. In southern California, it could produce around 140 therms. However, the value of those therms will vary drastically based on the efficiency of the existing hot water heating system on-site, and the current fuel prices.

us, 140 therms could only be worth $176 per year, if the client has super cheap natural gas and a very efficient heating system, or it could be worth as much as $614 if the property owners is using expensive oil or electricity to heat their hot water.

How does this impact a contractor’s business?

We need to focus on a very speci$c customer set. Customers that use 1) a lot of hot water - more then 1,000 gallons per day is best, and 2) have a very expensive heating source. is is a sales and marketing challenge for solar thermal installers.  Focusing on high water use buildings with huge loads, and properly communicating the $nancial implications.

Solar Thermal Trend #4 - Financing May Help the Industry 

A number of companies now offer $nancing and some public programs have been created. It's unclear the success that they're having and we should assume that it will take a long time for this sector to mature, similar to the solar PV industry. Remember, $nancing in PV started in 2005 and didn't take off until past 2010.

• FLS Solar

• Promise Energy

• Skyline Innovations

• Massachusetts Clean Energy Center has a financing program it’s running

What's the impact financing will have your business?

Right now, it's unclear the impact that $nancing will have because it's so new. One thing is clear, if we get the policy

around solar thermal to the same place it is for solar PV, $nancing will have a huge impact. e Massachusetts program might shed some light on this, and California also has a substantial solar thermal rebate program.

For a long time, the geothermal industry has assumed that if everyone just magically knew how efficient the technology is, that they wold just adopt it. This is never going to happen. There are many others variables that matter much more than the system efficiency.

What will not drive the geothermal industry

1. Continue to recite over and over again how efficient the systems are. First, prove it. Tests performed in laboratory conditions and soware models do not cut it. Real time monitoring is the only way to solve this.

4 4 Trends Driving the Geothermal Heat Pump Industry in 2013

Collecting data on existing systems is a big opportunity. We have a lot to gain from documenting our success.  Not having a ton of good project data hurts from a policy perspective by making it harder to find allies, but also from a sales perspective by increasing the perceived risk to property owners. Here are a few questions we don't have good answers answers to:

• How large is our industry?

• how quickly is it growing?

• what is the size, growth rates, etc in different regions and states? by customer category?

• how many jobs does it employ?

• how many dollars per dollar invested in the US, stays in the US?

• what are average installed costs by region, by system type, by system size?

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Second, homeowners only care about efficiency in how it impacts their savings. Translate efficiency into savings. Very few homeowners care about COP.

2. Economies of scale will not reduce installed costs. Similar to the solar thermal industry, geothermal is simply recon$guring commodity equipment. If the geothermal industry grew by 100x, the installed costs would drop slightly, but not drastically. e cost reduction would come so cost efficiencies, marketing, sales, lower margins can be accepted due to higher volume. We can't rely on lower installed costs to drive our market.

Here is what Can Drive the Geothermal Industry

Geothermal Trend #1 - State Policy Will Drive Adoption

In states that are heating dominated and using expensive heating sources, like New England, the policy is clear. Oil elimination. Sometimes called Renewable Heating and Cooling. e states in New England are getting behind this, we need to put gas on the "ames.

Heating Policy

• New Hampshire has established a thermal REC program

• Vermont and Renewable Energy Vermont has established task forces to figure out how to achieve 90% renewable energy generation for all energy sectors by 2050.

• Massachusetts has a pilot program of $6 million dollars for heat pumps and biomass that will be going into effect in 2013.

• MA DOER has submitted to the legislature a report that is in favor of a renewable thermal incentive program.

Cooling Policy

In states that are cooling dominated, or states that are heating dominated but use natural gas and thus electric utilities are peaking in the summer, the policy to focus on is clear, peak demand side management for cooling in the summer.

Western Farmers Electric Coop put out a great article on their rebate program describing the impacts of ASHP and GSHP on demand side management. is case study needs to be the cornerstone of our policy efforts in cooling dominated areas. 

E D U C A T I O N I S G O I N G D I G I T A L .

HeatSpring Learning Institute uses Cammpus to run online classes - so can you.

"How to Build an Online Course" is free for HeatSpring readers and available at

www.cammpus.com

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Why is this important and how does it impact your business?

• If you're serious about geothermal and it's the future of your business, we need you to get active and help get policy through. Policy will not happen by itself, we need to push it. 

• Getting policy in place in addition to the 30% ITC will make geothermal much more affordable to the general public. Cheaper equals growth.

Geothermal Trend #2 - Real Time Monitoring and Performance Based Contracts Are the Future of Geothermal

I wrote a full article on the subject that you can read here.

I'll provide a little recap.

• e top 50% of the best geothermal contractors now have the ability to double their business and put all of the fly-by-night geothermal installers doing horrible work out of business.

• Performance based contracts remove risk from the property owner, making them more comfortable in the investment.

• Real time monitoring will be required for product based incentives that New Hampshire has, and that other states are looking to create.

• Read more about performance based contracts here, how they could work, and what you'd need to add to your existing contracts to implement them.

Geothermal Trend #3 - Communications and Industry Research

e geothermal industry is currently run by contractors and engineers, generally speaking. We need to determine the best way to sell these projects and gather real data on the projects that we're putting in.

Geothermal Trend #4 - Fuel Prices Increasing

Exactly the same as solar thermal, installed costs will not be dropping, but fuel costs will rise, increasing the value of geothermal output.

It's clear oil, propane and electricity costs will continue to increase, there's growing evidence natural gas prices will also increase. Here's the logic behind gas prices increase.

e low cost of natural gas has created trends that will increase demand, and cost, 1) exporting the gas, 2) converting coal power plants to gas, and 3) light truck usage.

Your friendship and support heading into 2013 made this magazine possible.  We're capitalists, and we're going to work hard in the year ahead to make your investment in HeatSpring Magazine the best investment you make all year. 

Thank you for your contributions to our industry.

Brian Hayden, Publisher

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